Ad spending perking up?

Commentary by William Spain, CBS.MarketWatch.com Sept. 11, 2002

CHICAGO (CBS.MW) -- Remarkable how little difference a year can make.

The ad squeeze was very much on as we came into last fall and intervening events -- terrorist attacks, market meltdowns and corporate scandals -- do not seem to have made it significantly tighter.

In fact, if anything, there seems to be a little more optimism in the air as industry forecasters cautiously raise their hopes for spending this year and into 2003. The predictions, while as confusing and contradictory as ever, share the hopeful message that the bottom has arrived.

For instance, on Monday, Zenith Optimedia said it expects a 0.1 percent drop in U.S. ad spending this year. That is no great shakes, but it is an improvement over an earlier forecast from the media buyer jointly owed by Publicis and Cordiant, for a slip of 1.2 percent. In August of 2001, Zenith had predicted a 4.5 percent decline in spending for that woeful year -- and 0.1 percent growth in 2002.

Another leading prognosticator, Jack Myers, is looking for flat spending this year and 3 percent growth on 2003.

Myers periodically surveys top client, agency and media agency execs to get a sense of their confidence levels. His latest survey, completed last week, concluded that "contrary to most analyses and assumptions, last year's terrorist attacks had minimal impact on media spending," something he described as a "startling reality."

He also pointed out that "with actual spending coming in at flat for the year, ad spending results are meeting or surpassing the expectations even prior to the devastating impact of 9/11."

Earlier this summer, Interpublic's Bob Coen, who in December had predicted a 2.4 percent increase for 2002, said he now expects "positive but modest growth of 2.1 percent."

Are these forecasts for real or just wishful thinking?

As editor of Media Buyers Daily, Joe Mandese closely tracks these predictions and more. He sees some encouraging signs in that "we are starting to get some traction in specific media markets" but warned that some of that strength "could be illusory. "

For one thing, coming off a pitiful 2001, "the comparisons are more favorable," especially so for the third quarter as he estimates that Sept. 11 "displaced about $1 billion in ad spending" in the year-ago period.

One of the first indicators that things were picking up was the improvement on price and volume that broadcasters got in this year's "upfront" TV season, when buyers reserve spots on the major networks. By all accounts, it was up substantially over last year.

But its is important to remember that little of that money has actually changed hands and buyers can -- and do -- yank it back on a moment's notice. One of the first harbingers of the slump of 2001 came late the year before when General Motors canceled as much as 50 percent of its previously reserved time.

Forecasts aside, "the industry won't know until well into 2003" how things are going to turn out, Mandese noted.

Any current ad spending recovery "is on pins and needles," he continued. "It is dependent on the overall economy being propped up by low interest rates, mortgage refinancing, freebie car loans and low energy costs."

In other words, it could turn on a dime and we still could be in for a dip. If so, "it would be the only time on record when you had back to back annual declines in ad spending."

William Spain is a reporter for CBS.MarketWatch.com in Chicago.